Financials - Santos

Notes to the Consolidated Financial Statements
for the year ended 31 December 2012
20. Issued Capital (continued)
(a) Shares issued in Eastern Star Gas Limited acquisition
Santos acquired Eastern Star Gas Limited (“ESG”) in 2011. The consideration included the issue of 0.06881 Santos Limited shares for
each ESG share on issue. On completion of the Scheme of Arrangement on 17 November 2011, 51,200,158 fully paid ordinary shares were
issued and $673 million was credited to the Company’s capital account. In addition, 2,002,362 restricted shares were issued to ESG
employees to replace their existing ESG employee incentive plan shares. During 2012, $5 million was received in respect of repayment
of loans in relation to these shares (2011: $10 million).
Refer note 30(C) for further details.
(b) Santos Dividend Reinvestment Plan
The Santos Dividend Reinvestment Plan is in operation. Shares are allocated at the arithmetic average of the daily weighted average
market price of the Company’s shares on the ASX over a period of seven business days commencing on the second business day after the
Dividend Record Date. At this time, the Board has determined that a 2.5% discount will apply to the Santos Dividend Reinvestment Plan
on the final dividend for the year ended 31 December 2012. The last date for the receipt of an election notice to participate in the
Santos Dividend Reinvestment Plan is the record date, 7 March 2013. The Santos Dividend Reinvestment Plan was fully underwritten for
the 2011 final dividend.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, allowing returns to shareholders
and benefits for other stakeholders to be maintained, and to retain an efficient capital structure. In order to optimise the capital structure,
the Group may adjust its dividend distribution policy, return capital to shareholders, issue new shares, draw or repay debt or undertake other
corporate initiatives consistent with its strategic objectives.
In applying these objectives, the Group aims to:
• minimise the weighted average cost of capital whilst retaining appropriate financial flexibility;
• ensure ongoing access to a range of debt and equity markets; and
• maintain an investment grade credit rating.
A range of financial metrics are used to monitor the capital structure including ratios measuring Gearing, Funds from Operations to Debt
(“FFO‐to‐Debt”) and Debt over Earnings before Interest, Tax, Depreciation and Amortisation (“Debt‐to‐EBITDA”). The Group monitors these
capital structure metrics on both an actual and forecast basis.
During 2012, Santos Limited maintained a corporate credit rating of BBB+ from Standard & Poor’s. The credit rating was placed on “negative
outlook” in January 2011 following the Group’s announcement of the final investment decision on the Gladstone LNG project and this rating
outlook remains in place.
118